Interest Was Waived for Rangel on Loan for Villa

Representative Charles B. Rangel paid no interest for more than a decade on a mortgage extended to him to buy a villa at a beachfront resort in the Dominican Republic, according to Mr. Rangel’s lawyer and records from the resort.

The loan was given to him by the resort development company, in which Theodore Kheel, a prominent New York labor lawyer, was a principal investor. Mr. Kheel, who has given tens of thousands of dollars to Mr. Rangel’s campaigns over the past decade, had encouraged the congressman to be one of the initial investors in the project.

The loan, which was extended to Mr. Rangel in 1988, was originally to be paid back over seven years at a rate of 10.5 percent. But within two years, interest on the loan was waived for Mr. Rangel and six other early investors because the resort was generating less income than projected, according to a statement released on Friday by Jose Oliva, director of the resort.

The loan remained interest-free and Mr. Rangel eventually paid it off in 2003.

As details about the financing of the villa emerged on Friday, House Speaker Nancy Pelosi, through her spokesman, expressed support for an ethics investigation into Mr. Rangel’s failure to report rental income from the vacation home on his federal and state income taxes and financial disclosure forms. On Friday, The New York Times reported that Mr. Rangel, chairman of the House Ways and Means Committee, had earned more than $75,000 in rent on the vacation home since 1988, and according to his lawyers probably owed back taxes to New York State and New York City.

Mr. Rangel’s lawyer, Lanny Davis, said that the congressman’s accountant believed that Mr. Rangel would not owe federal taxes on the unreported income because the income would be offset by a deduction for depreciation and a credit for the taxes the resort owner paid to the Dominican government on the rental income.

The announcement from Ms. Pelosi came as Republicans seized on Mr. Rangel’s troubles in an attempt to portray him and his fellow Democrats as entrenched and corrupt.

“Instead of making this political, what we should do is have the ethics committee investigate,” Ms. Pelosi’s spokesman, Brendan Daly, said. “We want to look into this.”

Mr. Rangel, 78, who was elected to the House in 1970, has already asked the ethics committee to examine his renting four rent-stabilized apartments in Harlem and his use of Congressional stationery to solicit donations for an academic center at the City College of New York that would be named for him. He declined to be interviewed on Friday, but through Mr. Davis issued a statement saying he would also ask the ethics committee early next week to investigate his failure to report the rental income from the villa.

According to documents from the resort company, in 1988, Mr. Rangel, a Harlem Democrat put $28,926 down on an $82,750 beach house on the villa in the Punta Cana Yacht Club, and the developer originally agreed to finance $53,737.50 for seven years at interest rate of 10.5 percent. As an early investor, Mr. Rangel was considered a “Pioneer” by the resort company, and the interest was waived about 1990.

Mr. Davis said Mr. Rangel was not aware that he had not been paying interest on the mortgage, which he paid with proceeds from his rental income.

“Congressman Rangel is just learning about all of this now,” Mr. Davis said. “He didn’t know how the loan was being paid or whether it was supposed to be reported as income. And until yesterday he thought he had been paying 10.5 percent interest.”

Although Congressional ethics rules require that members report all gifts and gratuities they receive on an annual financial disclosure form, Mr. Rangel did not disclose the developer’s decision to forgive the interest. Mr. Davis said that Mr. Rangel was not required to report it as a gift because the congressman did not receive any special treatment, because the other six Pioneers received the same terms.

Mr. Davis and officials from the resort declined to name the other Pioneers.

“This was a business judgment made by the development,” Mr. Davis said. “It is important to note that Mr. Rangel neither received preferential treatment nor received any request from the owners of the resort — officially or unofficially.”

Photo

74 West 132nd Street, owned by Mr. Rangel and his wife, has been occasionally omitted from his income statements.Credit
Annie Tritt for The New York Times

A lawyer for the resort, Manuel Pietrantoni, echoed that assertion in an interview Friday. “These people took a chance on a risky investment and had faith,” he said.

But Melanie Sloan, executive director of the government ethics group Citizens for Responsibility and Ethics in Washington, said that more information was needed to determine whether Mr. Rangel was invited to invest in the project because he was a member of Congress.

Mr. Rangel’s personal finances have come under intense scrutiny since July, when news reports revealed that a prominent real estate developer had allowed him to lease four rent-stabilized apartments, including one he used as a campaign office.

Mr. Rangel agreed to relinquish the campaign office, which violated the state regulation that rent-regulated apartments be used solely as a primary residence. But he has vowed to stay in the remaining apartments, and pointed out that two of them had been combined into a single residence by a previous tenant who had removed an adjoining wall.

Mr. Davis said that Mr. Rangel was also determined to rectify the problems involving the Dominican villa by filing any necessary amendments to his tax returns and financial disclosure forms and paying any back taxes.

But a review of Mr. Rangel’s filings since the House began requiring financial disclosures in 1978 indicated a number of inconsistencies.

In some years, Mr. Rangel and his wife reported rental income from a six-unit building at 74 West 132nd St. that they had owned for decades. But between 1978 and 1987, and between 1993 and 2000, he listed no income from the building.

When asked about those omissions on Friday, Mr. Davis said that the congressman had reported the rental activity on his tax returns every year and paid all required taxes, but that he had not listed it on his financial disclosure forms in the years when the couple posted a loss. In 1991, however, Mr. Rangel wrote a letter to the chairman of the House Committee on Standards of Official Conduct stating that the apartment building had produced a loss in 1990.

In May 1988 he first listed a Punta Cana Yacht Club purchase on May 15, 1987, with a value of more than $250,000. But a month later, on June 10, 1988, Mr. Rangel amended that, giving a value of between $50,001 and $100,000. In 1988, Mr. Rangel added a liability, in the same range, with the creditor listed as Punta Cana Operating Company. He omitted that mortgage from his financial disclosures in 1990 and 1991. But he listed it again from 1992 through 1995, with a reduced amount of between $15,001 and $50,000.

Mr. Davis said that the congressman was seeking to determine whether additional amendments to his disclosure forms were necessary.

On Friday, Republicans sought to make Mr. Rangel’s finances a problem for Democratic candidates around the country. In an effort coordinated in Washington by the National Republican Congressional Committee, party operatives began circulating the names of Democrats who had accepted money from Mr. Rangel, who is a prolific fund-raiser.

“For a Democratic majority that pledged to ‘drain the swamp’ on ethical abuses in Congress, these latest charges against Chairman Rangel demonstrate how broken Washington truly is,” said Antonia Ferrier, a spokeswoman for Representative Roy Blunt of Missouri, the No. 2 Republican in the House.

“This seeming pattern of abuse shows why Congressional approval ratings are at the lowest levels in history,” she continued. “House Republicans will be discussing these allegations to determine the best course of action when Congress returns next week.”

Several weeks ago, House Republicans put forward a resolution censuring Mr. Rangel and saying he “dishonored himself and brought discredit to the House” by leasing the rent-stabilized apartments. The resolution argued that the favorable housing agreement amounted to a gift that Mr. Rangel failed to report. The resolution did not pass.

Raymond Hernandez contributed reporting.

A version of this article appears in print on , on page A1 of the New York edition with the headline: Interest Was Waived for Rangel On Loan for His Caribbean Villa. Order Reprints|Today's Paper|Subscribe